>> tom: it was a green christmas for the nation's retailers, but those strong holiday sales came at a heavy price for profits. >> it was very fierce, and i think a lot more than what most retailers were expecting coming into the season. >> susie: we look at how holiday sale prices are crimping margins across the retail spectrum. it's "nightly business report" for thursday, january 5. this is "nightly business repo" with susierib and tom hudson. "nightly business report" is made possible by:

captioning sponsored by wpbt >> tom: good evening and thanks for joining us. christmas has come and gone, but today, wall street was still talking about holiday sales. susie, there was a lot of worry about how much consumers would shop in november and december. >> susie: tom, worries about the economy didn't keep americans away from one of their favorite pastimes, shopping. for many of the nation's retailers, sales turned out better than they expected. the thomson-reuters sales index of 22 retailers rose 3.4% in december. that's a bit above expectations and better than last year. >> tom: still, as erika miller explains tonight, the strong sales came at a hefty price. >> reporter: 50%... 60%... even 70% off. retailers know many customers won't even look at merchandise unless there's a "sale" sign. >> the customer is demanding "sale," and they are only buying

when they do see "markdown" and "clearance". >> reporter: kohl's and j.c. penney lowered their fourth quarter earnings guidance today, blaming excessive markdowns. it didn't help that weather was warmer than usual in many parts of the country, making sweaters and coats a tough sell. >> i think there were unplanned markdowns that were being taken toward the end of the month on those items. i think that will continue and is continuing into january. and i think that's where you have the real margin risk. >> reporter: but in some cases, even desperate discounting wasn't enough to spur sales. gap and wet seal posted terrible same-store sales results, with declines of 4% and 3.7%, respectively. >> they were very promotional. they were very promotional and, still, that didn't help them as they expected. and therefore, they both missed expectations and posted two of the weakest same-store sales. >> reporter: the heavy promotional activity during the holiday season is raising concerns about what it will take to get consumers to open their

wallets in the months ahead. many americans are trying to save more and spend less, due to concerns about the economy. in this environment, many analysts think luxury stores will have the most success protecting margins. thomson-reuters has identified two companies likely to do well. >> according to our starmine data, cache and ethan allen are two high-end retailers that are very likely to post a positive surprise and beat their earnings for fourth quarter. >> reporter: but for the rest of the industry, it's time to cut losses. many stores will do whatever it takes to clear out winter items and make room for new, spring merchandise. >> i think we're going to see deeper promotions. january is a clearance month, and the importance of january this year, i think, is greater than in years past. >> reporter: the official verdict on the holiday season won't be known for several more weeks. most retailers won't finish their fourth quarters until the end of this month, so they won't start reporting earnings until mid-february. erika miller, "nightly business report," new york.

>> tom: sales of barnes and noble's electronic book reader, the nook, surged 70% during the holiday season, but the company's outlook turned a new page. the bookseller sharply cut its 2012 guidance, noting poor sales of its basic touch screen e-reader over the holidays. the company also is weighing a potential spin-off of its digital book business. the brick and mortar stores remain cash-flow positive, but morningstar analyst peter wahlstrom says the nook division is bleeding cash. >> it's going to be difficult for the company to reach profitability for several years, particularly as they continue to invest in the nook and digital platform. if they end up spinning that out or getting a large capital infusion, that would certainly help and give them a little it of time. >> tom: whalstrom thinks fair value for barnes and noble stock is $8. today, the stock lost almost a fifth of its value, closing at $11.24 a share.

>> susie: positive signs today for the job market-- fewer people filed claims for new unemployment benefits, and payroll processing firm adp reported big job gains in december. weekly jobless claims fell by 15,000 in the past week to 372,000. that's the eighth time in nine weeks that claims have stayed below the critical 400,000 mark, a sign that more jobs are being added instead of cut. meanwhile, adp said 325,000 jobs were added to payrolls last month, well above what was expected. that could bode well for the labor department's employment report. the december numbers come out tomorrow. the encouraging jobs news helped offset investor worries about european banks. the dow slipped almost three points, but the nasdaq rose 21 and the s&p 500 added 3.5 points. despite today's mixed market returns, 2012 could be a good year for investors as u.s. stocks post double-digit returns.

that's one of bob doll's predictions on his annual list of ten predictions. bob is the chief equity strategist at blackrock. he joins us now. hi bob, happy new year to you. >> same to you, susie. >> susie: you have a very interesting list, so let's go straight to it. looking at the global economy with your first prediction, euro goes regression, europe struggles but china and india grow contributing more than hw'# what's your thinking there and does the u.s. avoid recession? >> we think it does. it's a year of divergence, susie where the u.s., one of the few economies that accelerated its growth while europe because of all its problem is head into a recession. slow down in china and india, but as you read, you could see that they're still very powerful. in fact if you add the u.s. to china expind yeah, more than two thirds of the world's growth will be in those three countries. >> susie: what about oil

prices? >> oil prices will meander around current levels unless there's a problem in the middle east and of course they go highermq7ñih2ó and all bets a. >> susie: here you say u.s. earnings fail to beat estimates. but treasury rates rise. u.s. stocks post double-digit returns and u.s. stocks out perform international stocks. tell us what is going to be the catalyst to drive u.s. stocks higher? >> well the u.s. out performed as you know in 2011. we were up 2% in the average non-u.s. market was down 12. in part because corporations in america are delivering the results. we're in an environment where we think growth will continue to slow for earnings, call it 6% growth in 2012, add'nfor divide. a little bit of multiple or valuation improvement that could get us into double-digit territory. we have a 13-50 target for the

s&p 500 with again the u.s. leading the way. we think it's an environment where as growth is okay and risk premium begin to shrink around the european problem, we'll get some rise in interest rates. >> susie: let's look at some of your other market predictions related to all this. you mentioned dividends. you're saying that dividends will and buybacks will hit record highs. in terms of sectors you say energy will outperformño )uand financial. tell us a little more. >> certainly. dividends and share buybacks in 2011, susie, were up 37% from 2010. closing in on the record set in 2007, it will take a 20% increase this year for that record to be broken and we think that will happen. corporate america has a lot of cash, generating a lot of free cash flow. dividends and share buybacks are two of the primary uses of them

so that will be a big boon for investors. in terms of sector we like one cyclical sector, energy. one defensive sector, healthcare. we think it needsl

>> tom: still ahead-- a new safety fix for the electric and gasoline powered chevy volt. it comes as sales are looking for a spark. the pentagon is taking a page from business' playbook-- it's vowing to restructure, keep costs down, and implement a more nimble strategy focused on protecting the growing american interests in asia. the new defense priorities were announced by president obama today. as darren gersh reports, the

strategy also reflects another business and political reality, tight budgets. >> reporter: the transition from war to peace has proven difficult for the pentagon. it's a time when skills and focus are often lost. this time, the president vowed, would be different. >> we cannot afford to repeat the mistakes that have been made in the past, after world war ii, after vietnam, when our military was left ill-prepared for the future. as commander in chief, i will not let that happen again. not on my watch. >> reporter: the president plans to shift america's military resources, cutting back on europe and the middle east, and beefing up in asia to counter china's growing clout. to save money, more than 100,000 troops could be cut, and purchases of new weapons systems will be delayed. defense analyst tom donnelly says the strategy reflects a bipartisan consensus. >> defense spending is less important to the republicans

than keeping tax rates down and less important to the democrats than defending domestic entitlement programs. so, at best, it is everyone's second priority, and a distant second. >> reporter: the pentagon already faces $450 billion in budget cuts in the coming decade, and it could face another $500 billion in automatic spending cuts under the budget agreement reached in august. those numbers help explain why defense secretary leon panetta considers the budget a threat to the u.s. military. >> true national security cannot be achieved through a strong military alone. it requires strong diplomacy, it requires strong intelligence efforts, and above all, it requires a strong economy, fiscal discipline, and effective government. >> reporter: sounding like a corporate turnaround, the pentagon says it is committed to reducing what it calls the "cost of doing business."

analyst stuart sweet calls that recognizing reality. >> this is an era of limits. we're first going to feel it on defense. but before it's all over, we will be feeling it in social security. we'll be feeling it in medicare. we're going to be feeling it on tax increases. >> reporter: faced with economic limits, the pentagon has built in a backup plan it calls "reversibility." the idea is to continue small investments in some weapons and forces that would otherwise be eliminated so the military can ramp up quickly if an unexpected threat arises. darren gersh, "nightly business report," washington. >> susie: thousand of pepsi employees could be getting pink slips. the "new york post" today reported the soda maker is considering 4,000 job cuts as part of efforts to boost earnings. the company may also end its 401(k) match. pepsi would not confirm or deny the report, saying "information contained in certain media reports is inaccurate, and any changes affecting our employees

will be communicated to them first." pepsi also said, "it is evaluating all areas of its operations, including employment levels and benefits." the stock lost a little fizz today. tom, it fell 52 to $66.22 a share. that's just about where it was trading at this time last year. another mixed and muted session, but financial stocks continue seeing buyers in the new year. the financial sector was the leader today, up almost 1.5%, followed up the consumer discretionary and technology sectors. let's focus in on the financial sector. this exchange traded fund

follows the s&p financial sector. with today's gain, the fund is up 3.5% since new year's eve. we're looking at the past 90 sessions. a move over $14 would take it to its highest price since august. financial stocks limited the losses on the dow industrials. bank of america jumped more than 8.5%. b-of-a is back above $6 tonight. j.p. morgan was up 2% and american express up more than 1%. earlier, erika reported on the strong holiday sales coming at the expense of profit margins for some retailers. not ross stores-- it's already a discount apparel retailer. shares shot up 6% to an all-time high. it raised its fourth quarter outlook. video game retailer gamestop jumped almost 5%, up to its highest price since early november. and macy's added 4% to a new 52- week high. the department store had a nice trifecta today-- reported strong sales, raised its outlook, and increased its dividend. flooding late last year in thailand hurt the outlook for hard disc drives.

many are manufactured in the region hit by the floodwaters. but today, irish disc drive manufacturer sea-gate technology said it wasn't as bad as feared, and it lifted its outlook thanks to higher prices. that optimism lifted the sector. seagate rallied 6.5%. western digital gained more than 4.5%. lsi corp., which makes semiconductors for hard disk drives, shot up almost 8%. drug development can be a high risk/high reward game. there's regulatory approval to worry about; then, if okayed, whether health insurance will help pick up the tab for patients. dendreon has experienced the ups and downs with its prostate cancer vaccine. shares shot up 40% today on ten times average volume. quarterly sales of its vaccine were better than expected, thanks to more clarity on how doctors are reimbursed. the treatment is expensive-- it runs $93,000. the stock fell from 35 to 11 in august after withdrawing its financial forecast for the vaccine.

agri-business giant monsanto had strong sales in latin america, fueling much better than expected earnings in its fiscal first quarter. earnings were seven cents ahead of estimates, thanks to its growing businesses in brazil and argentina. seed sales ahead of the spring planting season in the u.s. also were strong. volume was strong on today's 5.5% rally. it's the stock's first close over $76 per share since before halloween. finally, the euro continues losing steam against the u.s. dollar, falling below one euro to a $1.28 u.s. this is the euro's lowest level in 15 months. and that's tonight's "market focus."

>> tom: general motors has a fix for the batteries in its electric hybrid chevy volt. more than 12,000 of the cars will be repaired, and g.m. will make the fix on volts in the factory beginning in february. the changes are designed to prevent potential fires after severe crashes by strengthening the safety structure around the battery. g.m. also will add a sensor to monitor coolant levels, and a tamper-resistant bracket preventing the coolant from being overfilled. the national highway traffic safety administration began investigating the volt six weeks after a battery caught fire a few weeks after a crash test, and the agency found similar problems in lab tests. nbr's midwest bureau chief, diane eastabrook, keeps an eye on the auto makers for us, and she joins us with the latest. diane. >> hi tom. general motors says it will be sending out notifications over

the next several days to those 8,000 or so owners here in the united states. they should be able to get to their dealer sometime in february to get that modification made to theññpq/ba. >> tom: so as far as repairs go, pretty small number, 8,000 volt sales in 2011, far below company projections. what are the expectations for this year. >> you're right, they were looking at about 10,000 last year and they came in just under that. although they had their best sales month ever for the volt in dels. they sold about 1500 of those vehicles. originally when they rolled the car out they were looking at selling about 45,000 this year. today when i talked to the company it said well we're really not setting a sales target for this year but we have the capacity to make and sell 45,000 volts globally this year. >> tom: so it sole the most in the month of december --ñu(bf december despite the battery we just reported on correct. >> that's right. >> tom: gm here went public back in november of 2010. $33 per share back then tonight

it's just above 22. what kind of shape is the overall business in for general motors. >> you know fall, the company is doing a whole lot better than it did when it emerged from bankruptcy a couple years ago. it's had a lot of success with the new sonic which is a smaller car and the chevy cruise. it picked up a little bit of market share last year. there's a lot of excitement over the company. it is doing much better than it has been. i think maybe what could be depressing the stock, there are some analysts saying some sales in the early part of thisñzx![ne a little slow -- auto companies could be a little show. >> tom: you mentioned excite but slow beginning of the year. the auto show kicks off in detroit. you will be on your way monday report frg there. what are you looking for, what is the industry looking for? >> do you know what, you hit the nail on the head. it's excite. the last few auto shows we've gone to is pretty depressed. a lot of companies didn't show up. you had chrysler and gm going into and out of bankruptcy, the

company was sour. there's a whole lot optimism this year. the auto companies have been selling a lot more vehicles in the last part of 2011 with the exception of the0w;jçvso there excitement and it seems like this industry is finally pulling itself out of the slump. >> tom: sounds like some good news where that big question remains over japan and we'll hear more about that next week in destroy. >> you're welcome. >> diane eastabrook in chicago. >> susie: let's take a look at what we're watching for tomorrow: as we mentioned, the labor department issues the december employment report. many economists are expecting the strongest job growth in months. also tomorrow, does the new year bring new opportunity or new risks for investors? "market monitor" guest mark luschini offers his outlook for 2012 and the investments he thinks will be most rewarding. just one day after being named the head of the consumer protection agency, richard cordray is speaking out.

he said that consumers deserve to have someone who will protect them against fraud and see that they are treated fairly in the financial marketplace. cordray also warned that there are consequences to breaking the law. >> consumers deserve to have someone who will stand on their side, who will protect them against fraud, and who will ensure that they're treated fairly in the financial marketplace. the new consumer bureau was created to make sure these things are achieved for all americans. >> susie: the consumer protection agency was created in 2010 by the dodd-frank financial overhaul. its goal is to promote fairness and transparency for financial products like credit cards and home loans.

>> susie: with more and more people forecasting recession in europe, tonight's commentator says, in 2012, the european debt crisis will only get worse. he's simon constable, columnist at "the wall street journal." >> if you think things were messy in europe in 2011, then just wait for this year. i'll have been commenting on the euro crisis for three years, but i expect my fourth year to be the most explosive. here's why-- a battle has been

set up between european government elites, who want to keep the single european currency, and the european taxpayers, who are being asked to endure financial hardship in order to keep the currency. those taxpayers, those people lucky enough to have jobs, aren't that happy about those hardships. nevertheless, the elected and unelected elites of europe seem hell-bent on forcing the euro and the austerity upon their people. in 2011, we saw greece burn due to those hardships. the elites see the euro as a way to make europe more like america, with its single currency, the dollar. and they do have a point-- single currencies have huge economic advantages. but in democracies, we are governed by consent, and there's the problem-- that consent is being tested. my worry-- it won't be just greece that burns, but instead the entire euro-zone. i hope i'm wrong. i'm simon constable. >> susie: and finally, there's at least one advantage to being

among the 99%-- fewer i.r.s. audits. the internal revenue service said today that one in eight people making above $1 million last year were audited. that makes them far likelier to come under the i.r.s. microscope than people earning less than $200,000 a year. just one in 100 individuals earning less than $200,000 had their income tax returns examined. the i.r.s. says audits and other enforcement actions helped it collect an additional $55 billion last year. >> tom: goes where the money is. >> susie: that's "nightly business report" for thursday, january 5. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> tom: when we're not on the air, join us online at nbr.com. there, you'll find full episodes of the program. you'll find complete show transcripts and all the market stats on our facebook page @bizrpt. and don't forget to follow us on twitter @bizrpt.

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